Budget session: Congress forecasts poor and painful recovery, sets out 10 point agenda for the govt

A day before the Budget session of the Parliament starts, the Congress said that the start of the fiscal year 2021-22 was ‘disastrous’ and the end will be ‘catastrophic’.

Hitting out at the Modi government for ‘wrong economic policies’, senior Congress leader and former Finance Minister P Chidambaram noted: “The year 2020-21 will end with negative growth. None of the numbers estimated at the beginning of the year will be achieved. The revenue targets will be missed by a large margin, capital investment will take a hit, the revenue deficit will be close to 5 per cent and the fiscal deficit will exceed 7 per cent.”

Saying that there is no point in wasting time over the Budget of 2020-21, Chidambaram said, “We are afraid that the FM will present dressed-up Revised Estimates for 2020-21 and attempt to build an attractive narrative for 2021-22.”

He highlighted that:

• The economy is in a recession and recovery will be slow and painful
• The rate of GDP growth in 2021-22 will be modest -- no more than 5 percent
• The current unemployment rates which are 9.2 per cent for rural India and 8.9 per cent for urban India will largely remain the same
• Most jobs that were lost will not come back and the rate of creation of new jobs will be small.

The Congress emphasized, “Agriculture will grow at a satisfactory rate if the government does not arbitrarily disrupt the sector with anti-farmer laws and retrograde import/export policies for agricultural produce”.

With regard to the industrial sector, the Congress forecasted, “The sector will not attract huge investments because of low savings rate, inadequate credit growth, protectionism, crony capitalism, encouragement of monopolies, a climate of distrust and vindictive administrative actions”.

“Seven years of the Modi government have wrecked our economy and the prospects of high growth…Looking ahead we do not see a ‘V’ shaped recovery. We believe that the recovery will be poor and painful,” the Congress added.

Suggesting a “prescription” for the economy, the Congress set out a 10 point agenda:

1. Impart a large fiscal stimulus to the economy, even if it is belated. Such a stimulus alone will put money in the hands of the people and stimulate demand.
2. Make direct cash transfers to 20-30 percent of the families at the bottom of the economy at least for a period of six months.
3. Formulate and implement a rescue plan for MSMEs to revive closed units, recover the jobs that were lost and create new jobs for those who have moderate education and skills.
4. Reduce tax rates, especially GST and other indirect tax rates (e.g., on petrol and diesel).
5. Increase government capital expenditure.

6. Recapitalize public sector banks immediately and encourage them to lend without fear of investigative agencies probing every loan.

7. Abandon protectionist policies, re-engage with the world, enter into bilateral trade agreements with as many countries as possible, and remove the bias against imports.

8. Formulate sector-specific revival packages for Telecommunication, Power, Mining, Construction, Aviation and Tourism Hospitality.

9. Review and rescind amendments to tax laws that have been widely viewed as tax terrorism.

10. Initiate a comprehensive and time-bound review of the regulations made by RBI, SEBI, TRAI, CERC and other regulatory agencies that have been widely regarded as over-regulation.